Commercial landlord and tenant relationships are defined by the commercial lease, as well as the Commercial Tenancies Act. Both the lease and the Act typically outline a number of possible remedies that landlords may draw on in the event of tenant default. Each has its own benefits, risks and rules.
Types Of Default
The choice of remedy depends, in part, on which of two categories the default fits into:
- Non-monetary default
- Monetary default
If a commercial tenant’s breach is of a non-monetary nature, then termination of the lease can only be achieved after the tenant has been given written notice. A sufficient amount of time must also be given in order to provide the tenant with an opportunity to correct the default.
For monetary breaches, lease termination is usually stipulated within the lease agreement. If the lease has no provision for arrears but the tenant has been in arrears for over 15 days, the landlord may terminate the lease.
Distress For Rent
This centuries-old remedy is outlined in the Act. It allows for a landlord to seize and sell the tenant’s possessions which are located on the premises.
The landlord must be extremely careful to follow proper protocol when exercising this remedy. For example, the landlord must:
- provide the tenant with proper notice
- wait an appropriate period of time before seizing goods
- obtain independent appraisals on the value of the goods
In addition, the landlord must be careful when distraining not to distrain for more than the value of the rent in arrears. The landlord must also be careful not to terminate the lease until the distraint has been fully completed.
A landlord must go to court to obtain an order for this type of relief. If granted, the order will require a tenant to either carry out or refrain from a certain action.
A landlord may sue the tenant for damages occasioned by lease violations. This can occur either after the tenant has been terminated or while the tenant is still on the property.
An experienced lawyer can provide commercial landlords with guidance on choosing the most appropriate remedy for optimizing recovery of rental arrears.